Incremental Analysis | |||
Make | Buy | Difference | |
Variable cost per unit | |||
Direct material | 9 | 0 | -9 |
Direct labor | 2 | 0 | -2 |
Variable overhead | 1 | 0 | -1 |
Purchase cost | 0 | 15.5 | 15.5 |
Total variable cost per unit | 12 | 15.5 | 3.5 |
Make | |||
Since fixed costs are unavoidable, they are not relevant | |||
2. Benefit of outsourcing = Fixed costs avoided - extra price paid | |||
=97,000 - 76,000*3.5 | |||
=$(169,000) | |||
Make | |||
3.Most it will be willing to pay = variable cost per switch + Fixed cost avoided | |||
=12 + 97000/76000 = $13.2763 |
GlobalSystems manufactures an optical switch that it uses in its final product. GlobalSystems incurred the following ma...
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Question Help Tech Systems manufactures an optical switch that it uses in its final product. The switch has the following manufacturing costs per unit (Click the icon to view the costs) (Click the icon to view additional information) Prepare an outsourcing analysis to determine whether Tech Systems should make or buy the switch. (For the Difference column, use a minus sign or parentheses only when the cost of outsourcing exceed the cost of making the switches in house) Make optical...
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Homework: Chapter 8 Homework Save Score: 0 of 1 pt 6 of 7 (5 complete) HW Score: 50%, 5 of 10 pts E8-29A (similar to) * Question Help o GlobalSystems manufactures an optical switch that it uses in its final product. (Click the icon to view the outsourcing decision analysis.) GlobalSystems incurred the following manufacturing costs when it produced 69,000 units last year: GlobalSystems needs 79,000 optical switches next year (assume same relevant B (Click the icon to view the...